Jul 17, 2013

Indian Govt allows 100% FDI in Defence, Telecom

In significant move, the Government of India has allowed 100% foreign direct investment (FDI) in defence and telecom services sectors and also raised the FDI limits in 12 sectors. This has been the major economic reform in the country since the depreciation of rupees weighing high on the Indian economy. The government has allowed major foreign direct investments through automatic route.

Considering the recommendations of the Arvind Mayaram committee, the UPA government at centre has increased the FDI limit in 12 sectors. It is noteworthy that that, this time the crucial sectors were also taken into consideration for increasing the FDI cap.

The Commerce and Industry Minister Anand Sharma told media that the decisions were taken on Tuesday night in a meeting chaired by the Prime Minister of India with key ministers in New Delhi.

However, the opposition parties – BJP and Left have opposed the hike in the FDI in crucial sectors like defence and telecom, the move could lead to security threat to India. And some alleged that the Congress-led UPA government did not wait for monsoon session of Parliament to discuss.

The opposition parties might not allow the government to function in the Parliament during the monsoons session opposing its FDI policies.

FDI in telecom services sector was increased to 100% from existing cap of 74%. However, the minister cleared that the foreign direct investment into India could come through automatic route or only after it was approved by the Foreign Investment Promotion Board (FIPB).

The FIPB would approve the FDI in defence production under 26% and above the limit the Cabinet Committee on Security would approve, which is defined by the government as “state-of-the-art” technology.

The government has changed 49% FDI in petroleum, natural gas and refining sectors to automatic route from the FIPB route. Now the investment in commodity exchanges, power exchanges and stock, exchanges could be done through automatic route for 49% FDI in these sectors.